Markets relieved by calm reopening of Cyprus banks

Markets buoyed by calm reopening of Cypriot banks as S&P 500 breaches all-time closing high

Associated Press
Asia stocks modestly higher after S&P hits record
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An investor looks at the stock price monitor at a private securities company on Thursday, March 28, 2013, in Shanghai, China. Renewed jitters about the debt crisis in Europe sent Asian stock markets lower Thursday. (AP Photo/Eugene Hoshiko)

LONDON (AP) -- Markets responded positively to the calm reopening of Cyprus's banks Thursday after a near two-week shutdown during which the country agreed on a bailout deal that will seize a chunk of many large deposits.

Optimism was further boosted by the S&P 500 index's foray above its all-time closing high set in Oct., 2007. All eyes will be on whether it can close at a new high before the long Easter weekend.

For most of the day, though, the focus in financial markets remained on Cyprus, as it has for the past couple of weeks.

Though there were queues as the banks reopened, there was no sign of panic. Cyprus has imposed capital controls to prevent a run on the banks, the first time such measures have been taken since the euro was established in 1999.

"The lack of a run has soothed fears over rising tensions amongst eurozone governments following the bailout," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.

In Europe, the FTSE 100 index of leading British shares closed 0.4 percent higher at 6,411.74 while Germany's DAX rose 0.1 percent to 7,795.31. The CAC-40 in France ended 0.5 percent higher at 3,731.42.

The euro was also solid, trading 0.3 percent higher at $1.2813. It's been a volatile week for Europe's single currency following the Cypriot bailout agreement that was clinched in the early hours of Monday morning. Early relief gave way to concern that Cyprus' bailout deal might be a model for the future.

Despite Thursday's rally, investors are likely to stay focused on Cyprus and its banking system for a while yet.

"The relatively calm open to Cypriot banks today should not be interpreted as an indication of how the crisis is likely to play out," said Michael Woolfolk, global markets strategist at Bank of New York Mellon. "As banking crises in Iceland, Argentina and Greece have repeatedly shown, conditions in Cyprus will likely get worse, perhaps much worse, before they get better."

Italy's political uncertainty will also remain in the spotlight. Following inconclusive elections around a month ago, the country is still without a government, and that's raised concerns over its future economic path. Italy is the third-largest economy of the 17 countries that use the euro.

In the U.S., the Dow Jones industrial average was up 0.2 percent at 14,552.83 while the broader S&P 500 index rose 0.2 percent to 1,565.74, still above its record close of 1,565 on Oct. 9, 2007.

A raft of U.S. economic due data failed to provide markets much direction. Though figures showed the U.S. economy grew by an annualized rate of 0.4 percent in the fourth quarter of 0.4 percent, more than the 0.1 percent previously thought, weekly jobless claims rose by 16,000.

Earlier in Asia, trading was affected by worries over policy tightening in China, the world's second-largest economy. The Shanghai composite index ended 2.8 percent lower at 2,340.50, with banking stocks leading the retreat.

That had a knock-on effect elsewhere in the region. Japan's Nikkei 225 index tumbled 1.3 percent to 12,335.96 while Hong Kong's Hang Seng lost 0.7 percent to 22,299.63.

Oil prices were steady, with the benchmark New York rate up 49 cents to $97.07 per barrel.

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